Yesterday, the Dow Jones had a negative day as the US ADP data
missed expectations which might have weighed on the sentiment heading into the
NFP report tomorrow. There might also be a general profit taking ahead of the
NFP data and the FOMC rate decision next week as the market might want some new
strong catalyst to make new highs. In the bigger picture, the market generally
peaks when the labour market weakens, and the unemployment rate starts to rise
steadily, so the bulls should be very careful heading into the 2024.

Dow Jones Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Dow Jones didn’t
do much in the first half of week as it got stuck in a consolidation. Yesterday
we got a negative day as the miss in the US ADP might have weighed on the
sentiment heading into the NFP tomorrow. In case we get a pullback from here,
the buyers should lean on the previous cycle high at 35683, while the sellers
will want to see the price breaking lower to pile in and extend the drop into
the 34150 support.

Dow Jones Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that on
this timeframe the buyers will also find the red 21 moving average for confluence around
the previous cycle high. This should make the level even more important as a
break lower will increase the chances of a selloff into the 34150 support,
which is also going to be the last line of defence for the buyers.

Dow Jones Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see the
consolidation highlighted by the blue box. A break to the upside is likely to
lead to an extension into the all-time high at 36944, while a break to the
downside will give us the pullback into the key 35683 level. We can also notice
that the Dow Jones has been diverging with
the MACD since
the break above the 34150 resistance. This is generally a sign of weakening
momentum often followed by pullbacks or reversals, so the buyers should be
extra careful going forward, especially given the weakening labour market.

Upcoming Events

Today we get the latest US Jobless Claims figures
where the market will want to see how fast the US labour market is weakening.
Tomorrow, we conclude the week with the US NFP report which is going to be a
big market moving event.

This article was written by FL Contributors at www.forexlive.com.

There’s no stopping the Japanese yen today as it seems like those who were short i.e. long USD/JPY over the last few months, are all jumping ship. I find it hard to fathom that Ueda’s remarks earlier today can be that big of a catalyst. However, it is perhaps a trigger point coupled with a break in the technicals in USD/JPY as well as catching up to the big plunge in Treasury yields recently:

We’ve known for about a month or two now that the BOJ has kicked the can down the road to March to April next year on any real hints of a policy shift. They kept alluding to the spring wage negotiations next year and that is still the same rhetoric that Ueda has mentioned today, even if he did open up more communication on exiting the current ultra easy policy.

I’d say that this is more of the fact that yen shorts have given up hope for a return to the trend that has prevailed for the majority of this year. The trade in the yen now is whether or not the BOJ will follow through after the wages outcome and traders are convinced that they very well might.

As such, this looks to be a case of yen shorts bailing and that is exacerbating the fall in yen pairs today. The technical break from the end of last week (USD/JPY falling below the 100-day moving average) and the heavy decline in Treasury yields were already key factors but it would seem now, the BOJ is giving traders a reason to go running.

This article was written by Justin Low at www.forexlive.com.

• GDP 0.0% vs +0.1% y/y second estimate

Euro area GDP is confirmed to see a marginal contraction in Q3. Looking at the breakdown, household consumption contributed +0.2% with government final expenditure contributing +0.1% on the quarter. This was offset by changes in inventories, which was -0.3%, while there were negligible contributions from gross fixed capital formation and external balance.

This article was written by Justin Low at www.forexlive.com.

USD/JPY is down 1.4% to 145.30 currently with the low earlier briefly touching 145.05 in European trading. The drive lower owes to BOJ governor Ueda’s remarks from Asia trading before he went on to align with Tokyo to pin down the spring wage negotiations as the potential turning point on policy here. Other dollar pairs are little changed as all the action has been in the Japanese yen instead:

As you can see, other major currencies are also seeing losses around 1.3% to 1.5% against the yen as well currently.

I reckon this might be a bit of a precursor as to what traders might be looking for in Q1 next year. But the real question is, will be the BOJ actually follow through on that? Yen longs might be starting to build up as early as now, hoping for that. However, the negative carry is still something that I’d be mindful about if you want to stay structurally long in the Japanese currency. It can be a rather painful one.

And not to mention, there is still the risk of the BOJ not following through and not using the stronger wages outcome to conduct a policy pivot. I mean, that was already supposed to be the narrative this year when Ueda took over. And look where we are now.

This article was written by Justin Low at www.forexlive.com.

• Rates likely to need to remain around current levels
• We remain vigilant to financial stability risks that might arise

He is commenting alongside the release of the financial stability report earlier here. So far, the above isn’t anything new as they continue to preach the higher for longer narrative considering where inflation is at.

This article was written by Justin Low at www.forexlive.com.

GBP

• The BoE kept interest rates
  unchanged as expected at the last meeting.
• The central bank is leaning towards
  keeping interest rates “higher for longer”, although it keeps a door open for
  further tightening if inflationary pressures were to be more persistent.
• The BoE members continue to repeat
  that they will keep rates high for long enough to get inflation back to target.
• The latest employment report beat
  expectations with wage growth remaining at elevated levels.
• The recent UK CPI missed
  expectations across the board, which was a welcome development for the BoE.
• The UK PMIs beat expectations on
  both the Manufacturing and Services measures, with the Services sector crawling
  back in expansion.
• The latest UK Retail Sales missed
  expectations across the board by a big margin as consumer spending remains
  weak.
• The market expects the BoE to start
  cutting rates in Q3 2024

JPY

• The BoJ kept its monetary policy basically
  unchanged at the last meeting but formally widened the YCC to 1% on the 10-year
  JGBs stating that it will be a reference cap.
• Governor Ueda repeated once again
  that they won’t hesitate to take easing measures if needed and that they are
  not foreseeing sustainable price increases.
• The Japanese CPIshowed that inflation pressures are easing although
  they remain well above the BoJ’s 2% target.
• The latest Unemployment Rate
  remained unchanged near cycle lows.
• The Japanese Manufacturing PMI fell
  further into contraction, but the Services PMI ticked higher remaining in
  expansion.
• The latest Japanese wage data beat
  expectations and as a reminder the BoJ is focusing on wage growth to decide
  whether to tweak its monetary policy.
• The market expects the BoJ to hike
  rates in Q2 2024.

GBPJPY Technical Analysis –
Daily Timeframe

On the daily chart, we can see that GBPJPY is now
near the key trendline where we have also the confluence with the 50% Fibonacci
retracement level. This is where the buyers should step in with a defined risk
below the trendline to position for a rally into new highs. The sellers, on the
other hand, will want to see the price breaking lower to increase the bearish
bets into the 178.00 handle.

GBPJPY Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see more closely the
bearish setup around the trendline and the Fibonacci level. If we do get a
bounce on the trendline, the buyers will then need to break above the
counter-trendline and the 186.30 resistance to confirm a rally into new highs.
The sellers, on the other hand, will lean on the counter-trendline to try again
a break below the major trendline.

GBPJPY Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
price is starting to diverge with the MACD right near the key trendline. This
is generally a sign of weakening momentum often followed by pullbacks or
reversals. In this case, the sellers will need a break below the trendline to
confirm the reversal and invalidate the bullish setup, while the buyers will
need a break above the counter-trendline to confirm the reversal and increase
the bullish bets into new highs.

Upcoming Events

Today we have another US
labour market report with the release of the US ADP data. Tomorrow, it will be
the time for the US Jobless Claims figures, while on Friday we conclude the
week with the NFP report. Weak US data is likely to weigh on global yields and
favour the JPY, while strong figures might keep the pair supported.

This article was written by FL Contributors at www.forexlive.com.

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• 📊 Upward Crossover: Insights into the current weekly bar’s movement.
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🚦 Potential Pullback and Resistance Levels:

• 📉 Bullish Prospects: The importance of considering a pullback below $47,000.
• 📊 Critical Levels: What breaking above $50,000 could signify, especially the $57,146 resistance.

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This article was written by Itai Levitan at www.forexlive.com.

• Risk environment remains challenging
• Some risky asset valuations continue to appear stretched
• Banking system is well capitalised, some evidence to net interest margins have peaked
• Vulnerabilities in market-based finance remain significant
• Full report

The key thing to note is that they say that businesses and households are still able to cope so far with higher interest rates. While there are risks to that in the short-to-medium term, the central bank is not quite in a mode to urgently scale back on tighter policy just yet.

This article was written by Justin Low at www.forexlive.com.

The major currencies bloc is showing little change for the most part, with just some minor extensions to the narrow ranges from earlier. EUR/USD continues to sit flattish near 1.0800, with large option expiries also in play while USD/JPY is up by just 0.1% to 147.30 levels.

The commodity currencies are holding a slender lead against the dollar, amid a slightly better risk mood. That being said, the gains in stocks are not really overwhelming as of yet so that is keeping traders on their toes for now. AUD/USD is up just 0.3% to 0.6570, a slight drop from around 0.6590 earlier in the session.

In the bond market, yields are a touch higher but we still have the US ADP employment data to work through so that will be one to watch in case it leads to any broader market moves later in the day.

This article was written by Justin Low at www.forexlive.com.

●In the previous meeting, Canada’s central bank kept
its key interest rate at 5%.

●The current interest rate is unsustainable for
Canadians, and it seems evident that the Bank of Canada will keep the overnight
key rate.

●The BoC decision on the interest rate is likely to
weaken the national currency—the nearest target for USDCAD is 1.3650–1.3700.

The
Bank of Canada (BoC) is set to release its final interest rate report on 6
December, marking the eighth interest rate announcement this year. The rate is
expected to remain at the current level.

In
the previous October
meeting, Canada’s central bank kept
its key interest rate at 5%. It was the third consecutive rate hold of the
year. In Canada, there is growing evidence that past interest rate hikes have
dampened economic activity and eased price pressures. Consumption has declined,
with lower demand for housing, durable goods, and many services. Lower demand
and higher borrowing costs are putting pressure on business investment.

‘The current interest rate is unsustainable for Canadians, and it seems
obvious that the Bank of Canada will keep the overnight key rate,’ said Kar
Yong Ang, Octa’s financial market analyst. ‘The expectation of a pause and a
possible potential rate cut is causing the currency to weaken,’ he added.

The
bank’s preferred measures of core inflation show downward momentum, with CPI
inflation falling to 4.0% in August, 3.8% in September and 3.1% in October.
Higher interest rates are moderating inflation in many goods that people buy on
credit, and this is spreading to services. Considering the more apparent signs
of easing price pressure, it is likely that the Governing Council will hold the
policy rate at 5%. Such a decision will weaken the national currency: the
near-term target for USDCAD is 1.3650–1.3700.

About Octa

Octa is an international broker that has been providing
online trading services worldwide since 2011. It offers commission-free access
to financial markets and various services already utilised by clients from 180
countries with more than 42 million trading accounts. Free educational
webinars, articles, and analytical tools they provide help clients reach their
investment goals.

The company is involved in a comprehensive network of
charitable and humanitarian initiatives, including the improvement of
educational infrastructure and short-notice relief projects supporting local
communities.

Octa has also won over 60 awards since its foundation,
including the ‚Best Educational Broker 2023‘ award from Global Forex Awards and
the ‚Best Global Broker Asia 2022‘ award from International Business Magazine.

This article was written by FL Contributors at www.forexlive.com.